Euro Downtrend Seems Clear - We Like Selling Strength
EURUSD – Retail forex crowds have remained impressively short Euro against the US Dollar despite a sizeable EURUSD pullback. But the shift in positioning gives us clear contrarian signal for further declines.
Trade Implications – EURUSD: Our “Tidal Shift”/Momentum2 strategy went short EURUSD from last week at $1.3245 as crowds bought aggressively into sharp declines. The trade seems obvious in hindsight, but the truth is that I think the same SSI-based strategy stands to do well going forward—especially as market conditions might favor a Euro decline toward $1.20. Short-term declines seem a bit overdone and we’ll probably need to allow for a short-term EURUSD bounce, but the substantial shift in sentiment leaves us in favor of selling Euro strength.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.